Smart Transport

Material shortages continue to impact new car production

Nissan Juke production body shop

Together with the ongoing chip shortage, a shortage in raw materials, including steel, could further affect the supply and price of new vehicles entering the market, according to new research.

A report by Cox Automotive and accounting firm, Grant Thornton, reveals that the price of aluminium and steel has "skyrocketed" due to increased demand and the complexities of transporting it around the world in the current climate, while plastics and rubber have seen reduced production - is another issue affecting manufacturers.

Owen Edwards, associate director at Grant Thornton UK, said: “There is increasing evidence of supply chain issues, shortages of raw materials and high raw material prices, which could affect the price and supply of new vehicles.

“The demand for hot-rolled coil steel used in the automotive industry for chassis has increased significantly in 2021.”

While car production overall is down, many manufacturers are refocusing the available materials towards electric vehicles (EVs), hybrids and SUVs in favour of cheaper and smaller city cars, according to the report.

EVs are expected to account for more than one-in-six new cars acquired in 2021, according to the latest figures from the Society of Motor Manufacturers and Traders (SMMT).

Every car- and van-maker is being impacted by the computer chip crisis, with some delivery times for cars lengthening from three to six months, and many new vans not expected to be delivered until 2022. 

The report anticipates supply issues will remain for the remainder of the year and won’t be fully resolved until 2022.

However, Edwards says that carmakers have reasons to be optimistic about the short-term outlook.

“They are resistant to disruption and adversity, and demand for vehicles is still robust,” he said. “This can be attributed to the way vehicles are sold, through structured finance products.”

"We've enjoyed a prolonged period of low-interest rates, making borrowing affordable. Demand is expected to continue this year, but clearly questions remain around the short supply of vehicles.”

With vehicle shortages, profit margins for both the new and used car markets are expected to remain high.

The joint report reveals the extent of manufacturer-related disruption within the automotive retail market throughout the pandemic.

Philip Nothard, insight and strategy director for Cox Automotive, said: "What these findings demonstrate is that the new vehicle market is not all doom and gloom, and manufacturers have done extraordinarily well to bounce back their fortunes with some using highly creative methods.

“While there is no doubt that current well-publicised material shortages are causing a slowdown in the new vehicle market and impacting on used supply and demand, manufacturers have demonstrated that they can be agile and adaptable enough to ride these situations out, which offers some hope for future recovery."

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